Top executives belonging to six major cryptocurrency companies including Circle and Coinbase on Wednesday asked Congress to provide clearer rules for the thriving $3 trillion industry while cautioning that excessively tough restrictions would push it overseas.
Reuters reported this is the first time ever that the senior executives in the industry have elaborated upon their businesses to US lawmakers in the US House of Representatives Financial Services Committee hearing amid rising concerns that cryptocurrencies may pose systemic risks and hurt investors.
Crypto executives stressed the need for careful, bespoke rules rather than forcing the industry to comply with existing regulations.
Alesia Haas, chief executive of Coinbase Inc. warned, “Without tailored legislative solutions that are openly debated with public participation, the United States risks unnecessarily onerous and chilling laws and regulations”.
Analysts are of the view that it is unlikely that Congress will be making any new crypto rules anytime soon, and that the lawmakers treated the hearing primarily as a fact-finding exercise.
Chairing the panel, Democratic Representative Maxine Waters, said there are questions about proper oversight and singled out Facebook Inc’s stablecoin plans as a major concern given the company’s huge global reach.
Some lawmakers, in particular Republicans, praised the executives for leading the way on what could be a pivotal technology.
“I am tremendously impressed. I see a lot of ingenuity, a lot of entrepreneurial spirits,” said Representative Pete Sessions, a Texas Republican. “We need to be supportive of you.”
Circle CEO Jeremy Allaire, FTX Trading CEO Sam Bankman-Fried, Paxos CEO Chad Cascarilla, Stellar Development Foundation CEO Dennelle Dixon, and BitFury head Brian Brooks also testified.
The fast-paced growth of cryptocurrencies and in particular stable coins — digital assets pegged to traditional currencies — has caught the attention of regulators, who are concerned that they could put the financial system at risk unless properly monitored.
Some policymakers, such as Senator Elizabeth Warren and Securities and Exchange Commission Chair Gary Gensler, also fear the products could be used for illicit purposes, or to take advantage of unsuspecting consumers.
Earlier in November, a US Treasury-led working group recommended Congress pass a law specifying stablecoins should only be issued by companies that have insured deposits, like banks.
Executives said they would welcome regulatory clarity, which could help the industry expand, but that overly restrictive rules could prove counterproductive.
The rapid growth in the sector underscores there is a strong investor appetite for digital assets and should be supported with clear rules rather than stifled, they said.
BitFury’s Brooks, who was formerly CEO of Binance’s U.S. business and before that a bank regulator, told lawmakers cryptocurrencies are similar to traditional assets.
He said, “We are the last country standing that hasn’t figured that out”.
But the complexity and volatility of cryptocurrencies, as well as wildly varying standards around disclosure, reserves, consumer protection, and other policies left some lawmakers concerned.
“Most of the people that I know have invested in cryptocurrencies because they think they can get rich quick,” said Representative Juan Vargas. “We’ve seen this before, unfortunately, and it led to the financial crisis.”